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Weekly Market Commentary _22 - 26 Mar_

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					                                           Weekly Market Commentary (22 - 26 Mar)                Issue Date: 30 Mar, 2010


                                                  ICBC Announces Fund-raising Plan

                                                     Sector Highlights. China banks performed slightly better
                                                      than the market and fell about 1% wow. The release of
                                                      fund-raising plans by ICBC could have removed an overhang
Indices performances                                  on the sector. Property sector remained weak though and fell
                                        Weekly        over 2% as market is concerned about further tightening
                            Price       Change
                                                      measures on the property market by the Central government.
China & HK Indices                                    Infrastructure sector dropped 3% as investors are concerned
HSI                         21,053.11    -1.49%       about the potential slowdown in growth of the sector.
HSCEI                       12,050.33    -1.73%
CSI300 Index                 3,275.00    -0.57%      Company Highlights. ICBC (1398) announced a 16% yoy
SHA Index                    3,208.21    -0.26%       growth in net profit to RMB128bn in line with expectations.
                                                      Robust fee income, low credit costs and investment gains at
Source: Bloomberg
*Price as of Mar 26, 2010                             RMB7.3bn offset the impact from net interest margin
                                                      squeeze. ICBC also announced plans to raise capital through
                                                      an A-share convertible bond issue (maximum size of
HSCEI 1-year price performance                        Rmb25bn) and an H-share equity raising. CCB (939) reported
                                                      15% yoy growth in FY09 earnings to RMB106.8bn in line with
                                                      consensus at RMB100-114mn. 4Q earnings dropped 32%
                                                      qoq to RMB20.7bn on a surge in loan loss provisions by 184%
                                                      to boost NPL coverage to 176% (164% of ICBC). PetroChina
                                                      (857) FY09 net profit was RMB103bn, down 9.7% yoy, slightly
                                                      below market estimate. Decline in upstream oil exploration
                                                      and production earnings was buffered by turnaround in oil
                                                      refining. Sinopec (386) FY09 net profit reached RMB61.8bn,
                                                      up 117% yoy, in line with market consensus, driven by
Source: Bloomberg
                                                      turnaround in refinery. Sinopec also announced the
                                                      acquisition of 27.5% stake in Angola oil project from parent at
                                                      a consideration of US$2.5bn. Chalco (2600) incurred a loss
                                                      of RMB4.6bn for FY09, higher than market consensus of a
                                                      RMB2.1bn loss. 4Q09 incurred a loss of RMB1.1bn (net profit
                                                      RMB21mn in 3Q). The company expected a profit in 1Q10,
                                                      but the magnitude is not announced. China Resources Land
                                                      (1109) reported a 121.1% surge in net profit to HK$4.4bn in
                                                      line with expectations. Netting revaluation gains, core profit
                                                      rose 86% yoy to HK$3.1bn on the back of a 77% yoy surge in
                                                      turnover to HK$16.6bn.

                                                     With the major China banks gradually announced their fund
                                                      raising plans, stock market performance could be improved
                                                      as a major overhang is removed. We expect HSCEI to trade
                                                      at between 11,500 -12,500 this week.




                                                                                     Page 1 , Total 13 Pages
                               HK Inflation Accelerates

                                  Market Highlights. The HSI eased 1.5% to 21,053 last week,
                                   driven by China banking, insurance and resource sectors.
                                   Average daily turnover declined slightly to HK$55bn.
                                  Macro Highlights. HK February Consumer Price Index (CPI)
HSI 1-year price performance
                                   rose 2.8% yoy, higher than that in January (1.0% yoy). Netting
                                   out the effects of the government’s one-off relief measures,
                                   the underlying inflation rate was 1.6% in February, compared
                                   with virtually nil inflation in January. According to a survey by
                                   the Census and Statistics Department, the average wage rate
                                   for all the sectors surveyed increased by 0.8% in nominal
                                   terms in December 2009 over a year ago.
                                  Sector Highlights. Local property sector was flat despite the
                                   Centa-City Leading Index rose 1.8% wow. Banking sector
                                   retreated slightly by less than 1% even though BOCHK
Source: Bloomberg
                                   reported results were higher than market estimates. BOCHK
                                   added less than 1% wow.
                                  Company Highlights. Li & Fung (494) reported FY09 net
                                   income rose 39% to HK$3,369mn, lower than market
                                   estimate. Turnover dropped 6% to HK$104bn and core
                                   operating income rose 29% to HK$4.0bn. On hoh
                                   comparison, 2H09 net income reached HK$2.0bn, rose 42%
                                   hoh. BOCHK (2388) reported a 311% yoy growth in net profit
                                   to HK$13.75bn which beat expectations at HK$12.5bn. Net
                                   operating revenue increased 2.1%, to HK$26.1bn.
                                   Pre-provision operating profit declined by 17.0% to
                                   HK$13.9bn, due to the expenses mainly in relation to the
                                   Lehman minibonds issue. Wharf (4) reported an 86% yoy
                                   surge in core earnings to HK$7.8bn. A final dividend at
                                   HK$0.64 was being declared. The company’s property
                                   investment and development business were solid. Property
                                   development earnings increased from a low base. Turnover
                                   grew 332% to HK$3,065mn and profit before tax turned
                                   around to HK$1,139mn. Hengen (1044) reported FY09 net
                                   income rose 58% to RMB2,118mn, better than market
                                   expectation. Revenue surged 35.4% to RMB10,834mn.
                                   Gross margin saw expanded 6ppt to 46%, mainly due to the
                                   yoy softness of pulp price and other raw material costs.
                                  We expect the HSI to trade at between 20,800-21,800 this
                                   week. Major results announcements include Cheung Kong
                                   (1), Hutchison (13), Henderson (12) and Bank of
                                   Communications (3328), CNOOC (883) and Zijin (2899).




                                                                   Page 2 , Total 13 Pages
China Sector Performance

   Conglomerates
        Industrials
   Basic materials
         Oil & gas
    Transportation
     Consumption
            Power
     Infrastructure
          Telecom
         Property
          Insurers
            Banks

                    -3.50           -3.00     -2.50        -2.00        -1.50        -1.00          -0.50     0.00
                                              Weekly share price performance (%)




Hong Kong Sector Performance




        Conglomerates


         Consumption


                Utilities


              Property


                 Banks


                            -0.80    -0.60   -0.40    -0.20     0.00     0.20      0.40      0.60      0.80   1.00

                                                     Weekly share price performance (%)




                                                                                                    Page 3 , Total 13 Pages
                                                Weak Yen Lifts Japanese Stocks

                                                 Macro Highlights. Japanese stocks were well supported last
                                                  week on a sharply weaker yen ahead of fiscal year end. The
Indices performances                              Nikkei 225 ended the week 1.6% higher to 10,996.37 while the
                                       Weekly     broader Topix gained 1.9% to 966.72.
                               Price   Change
Japan Indices
                                                 Bank of Japan board members were divided on their views of
                                                  the economy at their February meeting, reflecting signs of a
Nikkei 225 Index           10,996.37    +1.6%     sustained recovery as deflationary pressures persist. The
                                                  minutes reflect divisions among a policy board that last week
Topix Index                  966.72     +1.9%     voted 5-2 in favour of expanding a credit program from ¥10trn
Source: Bloomberg
*Prices as of 26/03/2010                          to ¥20trn.
                                                 Japanese consumer prices fell for a 12th straight month in
                                                  February to 1.2%, suggesting the deflation remains a major
                                                  problem in Japan. A number of items in the CPI became
Nikkei 225 1-year price performance               cheaper, with 335 components out of 524 showing declines.
                                                 Japan government plans to double the amount of deposits the
                                                  nation’s postal bank can collect from individual customers to
                                                  ¥20mn. The government plans to submit a bill to parliament in
                                                  April to raise the cap from ¥10mn and make changes to
                                                  privatization plans for Japan Post Holdings.
                                                 Japan’s fiscal plan could be released by June this year, which
                                                  includes a numerical goal for reducing the ratio of debt to GDP.
Source: Bloomberg
                                                  Japan’s debt has come under close scrutiny since S&P
                                                  reduced its outlook for the nation’s AA sovereign debt rating in
Topix 1-year price performance                    January.

                                                   Company Highlights. Nintendo (7784) plans to sell a 3D
                                                    version of its DS handheld player that doesn’t require the user
                                                    to wear glasses. It plans to disclose details of the new model at
                                                    the E3 show in Los Angeles starting on June 15. The device
                                                    will go on sales starting April 1. Toshiba (6502) will start
                                                    construction of a flash-memory plant in July, reviving a plan to
                                                    expand production capacity. The expansion comes as rising
                                                    sales of new technological products such as Apple’s iPhone
                                                    are boosting demand for NAND memory. Toshiba has the
                                                    capacity to make a combined 260,000 wafers per month at its 2
                                                    most sophisticated production lines in Yokkaichi.          Total
                                                    investment amount would total ¥350bn.
                                                 Investors are anxiously waiting for fiscal 2010 earnings season
                                                  to begin. This week’s trading range for the Nikkei 225 could be
                                                  between 10,700 and 11,200.




                                                                                    Page 4 , Total 13 Pages
                                                An Uninspiring Week
                                                Macro Highlights

                                                   The central bank said last Thursday its easy monetary policy is over
                                                    after it left key rates unchanged for the fifth consecutive quarter to
 Indices performances                               support the country’s still-fragile economic recovery. The central bank
                                       Weekly       held its discount rate at a record low of 1.250%, the secured loans rate
                              Price    Change       at 1.625% and the unsecured loans rate at 3.500%. The central bank
 Taiwan Index                                       has left its key rates unchanged since Feb. 19 last year, after having
 TWSE - Taiwan Taiex                                cut them by 237.5 basis points from September 2008 as the island
 Index                      7,876.86    -0.3%       entered its worst-ever recession.
                                                   Industrial production climbed for a sixth consecutive month, boosted
 *Price as of 26/03/2010*                           by rising orders for computers, mobile phones and televise ion
                                                    screens. Output advanced 35.17 percent in February from a year
                                                    earlier, after increasing a revised 70.08 percent in January, the
                                                    Ministry of Economic Affairs said. The report also showed that
                                                    production by manufacturers rose 36.42 percent from a year earlier,
TWSE 1-year price performance                       after climbing a revised 77.34 percent in January. Output in the mining
                                                    and quarrying industries dropped 8.15 percent, and increased 44.68
                                                    percent in the construction sector.
                                                   Unemployment rate declined for a sixth consecutive month in February
                                                    as exporters hired more people to meet increasing international
                                                    demand for the nation’s products. The seasonally adjusted rate fell to
                                                    5.65 percent from 5.73 percent in January, the statistics bureau said.
                                                    That compares with a median estimate of 5.67 percent. The number of
                                                    unemployed people declined to 623,000 in February from 631,000 in
                                                    January. Without adjusting for seasonal factors, Taiwan’s jobless rate
                                                    was 5.76 percent compared with 5.68 percent in January.
Source: Bloomberg

                                                Company Highlights
                                                   Catcher Technology Co. (2474 TT) surged by the 7% daily limit to
                                                    NT$76.50 last Thursday. The maker of computer casings was raised
                                                    to “outperform” from “underperform” at Macquarie Group Ltd., which
                                                    cited the company’s sales momentum driven by new Apple Inc.
                                                    laptops, notebook computer-casing orders and new touch-panel
                                                    business. PixArt Imaging Inc. (3227 TT), the maker of sensor chips
                                                    for Nintendo Co.’s Wii game console, jumped 6.8% to NT$204, the
                                                    highest since Jan. 28 on the same day. The stock gained on
                                                    speculation it is providing parts to Nintendo Co.’s 3-D version of its DS
                                                    handheld player that does not require the user to wear specialised
                                                    glasses. Yuen Foong Yu Paper Manufacturing Co. (1907 TT)
                                                    gained 0.8% to NT$13.10, the highest since Jan. 22. Taiwan’s largest
                                                    paper manufacturer by market value will raise the price of fine paper
                                                    next month by NT$1,800 per metric ton to NT$41,300 per ton.
                                                    Macronix International Co. (2337 TT) gained 3.9% to NT$20, the
                                                    highest since Oct. 31, 2007, after Yuanta Securities Co. said a version
                                                    of Nintendo Co.’s portable DS game machine may provide a boost to
                                                    the Taiwanese company. Wintek Corp. (2384 TT), which supplies
                                                    touch sensors for the iPad, surged by the 6.9% daily limit to NT$27.85,
                                                    the highest since Jan. 20, ahead of iPad debut on April 3. Yulon
                                                    Motor Co. (2201 TT), Taiwan’s largest car manufacturer, decreased
                                                    2% to NT$34.15 after its proposal to develop electric cars was
                                                    temporarily halted because of a delay in government plans, according
                                                    to a national newspaper.
                                                   For this week, we expect the Taiex Index to trade in-between 7,850
                                                    and 8,050.




                                                                                        Page 5 , Total 13 Pages
                                               Investors Wait for March Employment Figures
                                                  Macro Highlights. US stocks recorded its fourth straight
                                                   week of gains after President Obama signed the recent
                                                   healthcare bill into law. The Dow gained 1.0% to 10,850.36,
                                                   while the S&P 500 and Nasdaq rose by 0.6% and 0.9% to
                                                   1,166.59 and 2,395.13 respectively. Market participants are
Indices performances                               anxiously waiting for March’s jobs data, with current
                                      Weekly       expectations looking for a 9.7% unemployment rate and an
                              Price   Change
                                                   increase of 190,000 jobs in March.
US Indices
Dow Jones Industrial      10,850.36    +1.0%      US House of Representatives passed Obama’s healthcare
S&P 500                    1,166.59    +0.6%       plan by a 219-212 vote, rewriting rules governing the medical
Nasdaq                     2,395.13    +0.9%       industries and ensuring 32 million of uninsured American will
Source: Bloomberg                                  get medical coverage. The plan will cost $940bn over 10
*Price as of 26/03/2010
                                                   years, while reducing the federal deficit by $138bn on new
                                                   taxes on the highest earners, fees on health-care companies
S&P 500 1-year price performance                   and hundreds of billions of dollars in Medicare savings.

                                                  Existing home sales fell by 0.6% to an annualized rate of
                                                   5.02mn units, its third consecutive month of declines. Results
                                                   were better than market expectations of -1%. The extension
                                                   and expansion of a $8,000 federal tax credit has yet to spark
                                                   additional home sales this year. Purchases dropped by 2 of 4
                                                   regions, led by a 4.7% decline in the West. Sales in the South
                                                   also fell by 1.1%. The Northeast and Midwest gained 2.4%
Source: Bloomberg                                  and 2.8% respectively.

                                                  Adobe Systems (ADBE) earned a net profit of $127.2mn or
Nasdaq 1-year price performance                    $0.24 per share. Excluding items, EPS was $0.40 which beat
                                                   market expectations of $0.37. Revenues rose by 9% to
                                                   $858.7mn, driven by sales of its flagship product Creative
                                                   Suite 4. Management is projecting an EPS of $0.39 - $0.44
                                                   for the next quarter. The company will hold a launch event for
                                                   Creative Suite 5 on April 12. Walgreen (WAG) posted
                                                   1Q2010 net profit rose by 4.5% to $669mn or $0.68 per share,
                                                   lower than market expectations of $0.71. Sales rose by 3.1%
                                                   to $17bn, with same-store sales of general merchandise
Source: Bloomberg                                  falling by 1.6%. Gross profit margins improved by 0.5% to
                                                   28.8% as the company stocked fewer stocked fewer seasonal
                                                   goods. Tiffany (TIF) reported Q409 net profit quadrupled to
                                                   $140.4mn or $1.10 per share, missing market expectations of
                                                   $1.13. Revenues rose 17% to $981.4mn on growth in the
                                                   Americas, Asia Pacific and European regions.           Global
                                                   same-store sales rose by 11%, helped by a 22% jump at its
                                                   New York flagship store. For 2010, management expects
                                                   earnings from continuing operations of $2.45-$2.50, higher
                                                   than current expectations of only $2.43. Revenues are also
                                                   projected to rise by 11%.

                                                  We are expecting US stocks to range trade during the first half
                                                   of 2010. As the end of Q1 2010 is fast approaching, we are
                                                   expecting window dressing activities to support US equities
                                                   this week. Meanwhile, investors are waiting to March jobs
                                                   data to see if the employment picture has improved. The Dow
                                                   Jones Industrial Average (DJIA) is expected to meander
                                                   between 10,600 and 10,900 this week.




                                                                                  Page 6 , Total 13 Pages
                                                 Dragged By Uncertainty Over Greece
                                                 Macro Highlights
                                                     Heavily indebted Greece won a major pledge of financial support from
                                                      the other countries that use the euro and the International Monetary
                                                      Fund in a deal that aims to halt the government debt crisis undermining
I Indices performances
                                                      Europe's currency union. The joint eurozone and IMF bailout program
                                        Weekly        comes with strict conditions, making no money available to Greece right
                              Price     Change
                                                      now. It could be tapped only if Greece or other financially troubled
Pan-European Indices                                  eurozone members cannot raise funds from financial markets and would
DJST Euro Stoxx 50                                    require the unanimous agreement of the 16 eurozone countries to
Index                      2,940.94      +1.5%        release the loan funds. Greece needs to borrow some 54 billion euros
FTSE 100 Index             5,703.02      +0.9%        this year and must refinance some 20 billion euros in April and May.
DAX Index                  6,120.05      +2.3%       The U.K.’s inflation rate dropped more than economists forecast in
CAC 40 Index               3,988.93      +1.6%        February as lower costs of items from toys to energy sapped price
                                                      pressures in the economy. Consumer prices rose 3% from a year earlier,
                                                      after increasing 3.5% in January. The median forecast by economists
Source: Bloomberg                                     was 3.1%. On the month, prices increased 0.4 percent. Core inflation,
*Price as of 26/03/2010
                                                      which excludes costs of energy, food, alcohol and tobacco, slowed to
                                                      2.9% in February, from 3.1% in January. Retail price inflation, a cost of
                                                      living measure used in wage negotiations, was 3.7% in February, the
DJST Euro Stoxx 50 Index 1-year price                 same as in January. Excluding mortgage interest payments, the rate was
performance                                           at 4.2%, compared with 4.6% the previous month.
                                                     Europe’s service and manufacturing industries expanded at the fastest
                                                      pace in two and a half years in March as reviving global demand
                                                      prompted companies to step up output. A composite index based on a
                                                      survey of euro-area purchasing managers in both industries rose to 55.5
                                                      from 53.7 in February, Markit Economics said. Economists forecast a
                                                      gain to 53.8. A reading above 50 indicates expansion.
                                                 Market Performance
                                                     European stocks rose for a fourth straight week as European leaders
                                                      agreed on a Greek rescue proposal, putting the IMF on standby. Greek
                                                      banks were the best performers on lowered investor concerns over
                                                      Greece. The DJST Euro Stoxx 50 index gained 1.5%, while Germany’s
                                                      DAX climbed by 2.3%. Greece’s ASE Index jumped 4.8%.
                                                 Company Highlights
                                                     ArcelorMittal (MT NA), the world’s biggest steelmaker, is seeking to
                                                      spend $600mn on iron ore expansion this year while expanding
                                                      production capacity on the raw material by 67% by 2015, in order to raise
                                                      self-sufficiency in raw materials as prices soar. The Luxembourg-based
                                                      company wants to raise capacity to 100mn metric tons from 60mn tons.
                                                      ArcelorMittal, Nippon Steel Corp. and Posco are seeking to purchase or
                                                      expand mines to cut costs as Mainland Chinese demand crimps global
                                                      supplies of iron ore. BG Group Plc’s (BG/LN) Queensland Curtis LNG
                                                      venture in Australia will have China National Offshore Oil Corp.
                                                      purchasing liquefied natural gas from it for an estimated $70bn, marking
                                                      the nation’s largest export deal. The companies signed an agreement in
                                                      Peking yesterday to supply 3.6mn metric tons of LNG over 20 years
                                                      starting 2014.         Commerzbank AG (CBK GR), Germany’s
                                                      second-largest bank, expects to post a pretax profit for the first time since
                                                      2008 in the first quarter after trading results improved. Commerzbank,
                                                      which was forced to seek government aid amid the financial crisis,
                                                      posted a net loss of 4.5bn euros last year.
                                                     We foresee opportunities from luxury goods companies. Going forward,
                                                      economic recovery, improved financial wealth and consumer sentiment
                                                      should support demand for both hard and soft luxury products and will
                                                      therefore transform the sector from a cyclical recovery play into a
                                                      long-term growth story. Re-stocking is likely to occur as retailers
                                                      respond to an uptick in consumer demand. There could be tradable
                                                      rallies for oil stocks as we foresee an uptrend in oil stocks as global
                                                      economy continues to recover, which will undoubtedly fuel an increase in
                                                      consumption.
                                                     For this week, we expect the DJST Euro Stoxx 50 to trade in-between
                                                      2,850 and 3,050.




                                                                                           Page 7 , Total 13 Pages
Major Rates
                                                US Treasury Bonds
                                      Weekly    Treasuries auction drawn disappointed results
                           Closed     Change
USD
                                                   Total $118Bn treasuries auctions held last week for 2yr, 5yr
                                                    and 7yr drew disappointed results. $44Bn of 2yr, $42Bn of 5yr
 2-Year Treasury Yield     1.039%      +5 bps
                                                    and $32Bn of 7yr auction drew a yield of 1.000%, 2.605% and
10-Year Treasury Yield     3.847%     +16 bps       3.374% respectively. Treasuries have been sold-off after the
30-Year Treasury Yield     4.746% +16.7 bps         auctions. The 10-Yr Treasury yield traded in a range from
                                                    3.643% to 3.924% and ended at 3.847%, widen 16 bps.
EUR                                                Berkshire Hathaway’s notes due February 2012 yielded 0.89%
2-Year Bund Yield          1.000%      +0 bps       on March 18 which was 0.034% less than Treasuries. The
                                                    bond market is saying that it’s safer to lend to Warren Buffett
10-Year Bund Yield         3.150%      +5 bps       than Barack Obama.          Bond buyers are towards the
30-Year Bund Yield         3.899%      +0 bps
                                                    comparative scarcity of high-quality and short-maturity credit
                                                   Data wise, Weekly Jobless Claims reported 442K fell from
                                                    previous 456k. Q4 Real GDP revised down to 5.6% from 5.9%
US Treasury 10-Year Benchmark Yield                 and the GDP price index was revised up slightly from +0.4% to
                                                    +0.5%
                                                   Expected Range: 10-year UST at 3.75/4.05%
                                                German Bunds
                                                ECB President Trichet said Intervention of IMF
                                                “Very Very Bad”
                                                   European government bunds prices retreated last week as the
                                                    EU finally agreed on a solution to assist Greece. The 10-Yr
Source: Bloomberg                                   Bunds yield traded in a range from 3.170% to 3.049% and
                                                    ended at 3.150%, up 5 bps from previous week.
German Bund 10-Year Benchmark Yield                EU leaders basically endorsed a proposal suggested by
                                                    France and Germany, in which each euro-region country would
                                                    offer loans to Greece according to its stake in ECB, and that
                                                    would totally amount to more than half of the loans to Greece.
                                                    IMF would provide the rest of the loans, but only as the last
                                                    resort. ECB president commented that if IMF “exercises any
                                                    responsibility instead of the eurogroup”, this would be “very,
                                                    very bad”. His stance shows a clear deviation from those of
                                                    European political leaders.
                                                   Fitch downgraded the credit rating of Portugal from AA to AA-,
Source: Bloomberg
                                                    with negative outlook. The credit agency cited that relative
                                                    macroeconomic and structural weakness, its weaker prospects
                                                    for economic recovery and sluggish GDP was the major driver
                                                    of downgrade.
                                                   UK announced its 2010 Budget last week. Public sector
                                                    borrowing was revised down to GBP 166.5Bn from 178Bn in
                                                    pre-budget report. For 2010 to 2011, the net borrowing through
                                                    issuance of Gilts would be GBP 163Bn, which is 13Bn lower
                                                    than original estimate of GBP176Bn.
                                                 Expected Range: 10-Year Bunds at 3.05/3.25%




                                                                                   Page 8 , Total 13 Pages
                  Foreign Exchange and Gold
                  USD Overview
                  The U.S. housing market was still under pressure. Sales of existing
                  U.S. homes fell in February for a third month, and the number of
                  properties on the market climbed by the most in almost two years,
                  casting a pall over the prospects for a recovery. Purchases
                  dropped 0.6% to a 5.02 million annual rate, the lowest level in eight
                  months. New home sales figures were also disappointing.
                  Blizzards, unemployment and foreclosures combined to produce
                  the fewest sales of houses last month since record-keeping began
                  in 1963. The supply of homes at the current sales rate increased to
                  9.2 months’ worth, the highest since May, from 8.9 months.
                  However, data such as durable goods and the GDP figures turned
                  out to be favorable to the investment sentiment. But more
                  importantly, the dollar was favored by the investors with increasing
                  risk aversion on the uncertain outlook of the euro. One more
                  euro-area country got credit downgrade and investors stayed
                  cautious before the EU summit during March 25-26. The dollar lost
                  some of its gain on Friday when finally a Greece aid plan was
                  agreed by the leaders of the 16 nations in the region on the summit.


                  Euro Recovers Against Dollar on Greece Aid Plan
EUR
                      The euro-region economy is showing mixed signs of recovery
                       after a near-stagnation in the fourth quarter. Europe’s service
                       and manufacturing industries grew at the fastest pace in more
                       than two years in March, while economic confidence declined
                       and industrial orders dropped. The downgrade of Portugal’s
                       credit rating intensified the concerns over the euro’s outlook
                       and the result of the EU summit led to a rebound of the
                       currency on Friday. The EUR/USD finally closed at 1.3410,
                       losing 120 bps or 0.89% from the previous week.
Source: Reuters
                      Europe’s services and manufacturing industries grew at the
                       fastest pace since 2007. A composite index based on a
                       survey of euro-area purchasing managers in both industries
                       rose to 55.5 in March from 53.7 in February, London-based
                       Markit Economics said on Wednesday. That’s the highest
                       since August 2007. On the other hand however, European
                       industrial orders unexpectedly declined in January led by a
                       slump in demand for capital goods such as machinery.
                       Orders to industrial companies in the 16-nation euro area fell
                       2% from December, when they gained 0.8%, data from the
                       European Union’s statistics office showed, while an increase
                       of 1.8% was expected. From the year-earlier month, January
                       industrial orders rose 7%.
                      Portugal’s credit rating was lowered one step by Fitch to AA-
                       with a “negative” outlook, the ratings company said in a
                       statement. The nation’s gross domestic product per capita
                       and trend growth are “significantly below” what is typical for a
                       AA country, Fitch said.
                      European chiefs put the International Monetary Fund on
                       standby to aid debt-stricken Greece, seeking to snuff out a
                       threat to the stability of the euro. Leaders of the 16-nation
                       euro region endorsed a Franco-German proposal for a mix of
                       IMF and bilateral loans at market interest rates, while voicing
                       confidence that Greece won’t need outside help to cut
                       Europe’s biggest budget deficit. “We had to answer the
                       question: How can people place long-term trust in the euro as
                       a stable currency and how can a currency union combine
                       solidarity and stability?” German Chancellor Angela Merkel
                       said after a European Union summit in Brussels on Friday. “In
                       this context, we really broke new ground.”
                      Expected range for EUR/USD this week: 1.3300 – 1.3550.




                                                      Page 9 , Total 13 Pages
JPY               More Downside Pressure Emerges
                     Despite that Japan did well in exports in February, the outlook
                      of the nation’s economic recovery was still hindered by a
                      persistent deflation. The country’s central bank has come up
                      with a 20-trillion yen loan program to fight deflation and there
                      was committee member who believes in the true stimulus
                      effect of increasing the quantitative easing measures rather
                      than just do it out of the government’s pressures. This makes
                      more room for the Bank of Japan to add on such policy in the
Source: Reuters       future. The USD/JPY finally took a move last week after
                      several weeks of boring range-trading with a closing at 92.52
                      on Friday, gaining 198 bps or 2.19% from the previous week.
                     Japan’s exports climbed at the fastest pace in 30 years in
                      February as global trade recovered from the worst postwar
                      recession. Shipments abroad increased 45.3% from a year
                      earlier, helping the trade surplus expand the most since 1982.
                      Demand for Japanese goods rose to all regions for the first
                      time since August 2007. Yet at 5.1 trillion yen ($57 billion), the
                      value of exports remains about a third lower than the March
                      2008 peak of 7.7 trillion yen.
                     Japan’s consumer prices fell for a 12th month in February,
                      adding pressure on the central bank to eradicate deflation that
                      is hampering the economic recovery. Prices excluding fresh
                      food slid 1.2% from a year earlier, after dropping a 1.3% in
                      each of the preceding two months, data from the statistics
                      bureau showed on Friday. The result matched the market
                      expectation. Finance Minister Naoto Kan said the report
                      shows more efforts are needed to overcome deflation even as
                      price declines ease. The Bank of Japan last week doubled a
                      credit program for commercial lenders to 20 trillion yen, a
                      move Governor Masaaki Shirakawa said is aimed at lowering
                      borrowing costs further to spur growth and prices.
                     The Bank of Japan’s expansion of a credit program earlier this
                      month will spur the economy by reducing borrowing costs,
                      said Ryuzo Miyao, a Kobe University professor who joined the
                      policy board on last Friday. “Lowering interest rates even a
                      little bit, or keeping interest rates at very low levels amid a
                      recovery, may be able to provide more stimulus and help
                      sustain economic growth,” Miyao, 45, said at his inaugural
                      press conference late on March 26 in Tokyo.
                     Expected range for USD/JPY this week: 91.50 – 93.50.


                  Consolidating at Levels around USD1,100
Gold                 The yellow metal stayed fairly narrowly range-bound trading
                      last week. It dropped to the weekly low on Wednesday and
                      rose in the following days on speculation that demand will
                      increase amid escalating debt concerns in Europe and after a
                      South Korean naval vessel sank near the border with North
                      Korea. Gold priced in euros reached a record on March 5.
                      The bailout of Greece accomplished by the Europeans is
                      believed to be only temporary and the future of the euro
Source: Reuters       remains weak. That means those central banks that had
                      been buying euro as a reserve asset, but are still fearful of
                      owning more dollars, have little choice but to move toward
                      gold. Gold finally closed at USD1,107.50 on Friday, up
                      slightly by 0.05% or USD0.50 compared to the previous week.
                     Investors also bought gold after the Korean incident. A South
                      Korean patrol vessel sank off the island of Baengnyeong in
                      the Yellow Sea. The cause wasn’t immediately clear. The
                      sinking prompted President Lee Myung Bak to meet with
                      security officials in Seoul.
                     Expected range for gold this week USD 1,080 – 1,120.

                                                     Page 10 , Total 13 Pages
Market Snapshot
Major stock markets                                              Economic Data
                                       Previous
                                Last    Week        Change (%)   US
DJIA (US)                  10,850.36    10,741.98         1.01   US GDP Annualized             (4Q)         5.60%      5.90%
S&P500(US)                  1,166.59     1,159.90         0.58   GDP PRICE INDEX                (4Q)        0.50%      0.40%
NASDAQ(US)                  2,395.13     2,374.41         0.87   Durable Goods Orders (FEB)                 0.50%      3.00%
FTSE100(UK)                 5,703.02     5,650.12         0.94   New Home Sales (MoM) (FEB)                 -2.20%   -11.20%
DAX(GERMAN)                 6,120.05     5,982.43         2.30   Existing Home Sales (MoM) (FEB)            -0.60%     -7.20%
CAC40(FRANCE)               3,988.93     3,925.44         1.62
NIKKEI225(JAPAN)           10,996.37    10,824.72         1.59   UK
S&P/ASX200(AUSTRALIA)       4,896.90     4,872.20         0.51   CPI (MoM) (FEB)                            0.40%      -0.20%
TWSE(TAIWAN)                7,876.86     7,897.91        -0.27   RPI (MoM) (FEB)                            0.60%      0.00%
KOSPI(KOREA)                1,697.72     1,686.11         0.69   Retail sales w/auto fuel (MoM) (FEB)       2.10%      -1.80%
SET(THAILAND)                778.86        774.59         0.55   Total Business Investment (QoQ)            -4.30%     -5.80%
HSI(HK)                    21,053.11    21,370.82        -1.49
HSCEI(HK)                  12,050.33    12,262.36        -1.73   EURO ZONE
HSFM25(HK)                  7,377.67     7,505.91        -1.71   Eurozone Consumer Confidence (MAR)            -17        -17

                                                                 PMI Composite (MAR)                          55.5       53.7
                                                                 Industrial New Orders SA (MoM) (JAN)       -2.00%     0.80%

MajorCurrencies                                                  Eurozone M3 SA (YoY) (JAN)                 -0.40%     0.10%
                                       PREVIOUS
                              LAST       WEEK   CHANGE(%)
USD/JPY                       92.52         90.54         2.19   AUSTRALIA
EUR/USD                      1.3410        1.3530        -0.89   GDP YoY (4Q09)                             2.70%      0.50%
GBP/USD                      1.4898       1.5013         -0.77   AU Unemployment Rate              (FEB)    5.30%      5.30%
USD/CHF                      1.0652        1.0613         0.37   HEADLINE CPI YoY (4Q)                      2.10%      1.30%
USD/CAD                      1.0266        1.0173         0.91
AUD/USD                      0.9041        0.9154        -1.23   NEW ZEALAND
NZD/USD                      0.7040        0.7082        -0.59   GDP YoY (4Q, 09)                           0.40%      -1.30%
                                                                 Unemployment Rate             (4Q)         7.30%      6.50%
BondsYields                                                      INFLATION YoY (3Q 09)                      1.70%      1.90%
                                   PREVIOUS             NET
                              LAST   WEEK            CHANGE
US 10YR TREASURY (%)         3.8468        3.6892       0.1576   CANADA
US 30YR TREASURY (%)         4.7457        4.5794       0.1663   GDP ANNUALIZED (4Q09)                      5.00%      0.40%
UK10YR GILT (%)              4.0370        3.9550       0.0820   CA Unemployment Rate              (FEB)    8.20%      8.30%
GE 10YR BUND (%)             3.1500        3.1090       0.0410   INFLATION YoY (FEB)                        1.60%      1.90%
AU 10YR GOV'T (%)            5.7380        5.6700       0.0680
NZ 10YR GOV'T (%)            5.9860        5.8900       0.0960   JAPAN
CA 10YR GOV'T (%)            3.5600       3.4820        0.0780   National CPI (MoM) (FEB)                   -1.10%     -1.30%
                                                                 Merchandise Trade Exports (YoY%) (FEB)     45.30%   40.90%
InterestRates                                                    Merchandise Trade Imports (YoY%) (FEB)     29.50%     8.60%
                                   PREVIOUS             NET
                              LAST   WEEK            CHANGE
US FED RATE (%)               0.250         0.250        0.000   HONG KONG
UK BASE RATE (%)              0.500         0.500        0.000   Exports (YoY%) (FEB)                       28.50%   18.40%
CANADA BANK RATE (%)          0.250         0.250        0.000   Imports (YoY%) (FEB)                       22.40%   39.50%
EUR REFINANCING RATE (%)      1.000         1.000        0.000
HK PRIME (%)                  5.250         5.250        0.000
AU CASH RATE (%)              4.000         4.000        0.000
NZ CASH RATE (%)              2.500         2.500        0.000




Source:BloombergL.P.


                                                                                            Page 11 , Total 13 Pages
Coming Economic Indicators
              Mon                                Tue                             Wed                               Thu                                    Fri
            29 Mar                          30 Mar                              31 Mar                          1 Apr                                2 Apr
US                              US                               US                               US                                    US
-   Personal Income (Feb)       -   S&P/CS Composite-20          -   MBA Mortgage Applications    -   Challenger Job Cuts               -   Domestic Vehicle Sales (Mar)
-   Personal Spending (Feb)         (YoY)(Jan)                       (Mar 27)                         (YoY)(Mar)                        -   Total Vehicle Sales (Mar)
-   PCE Deflator (YoY)( Feb)    -Consumer Confidence (Mar)       -   Chicago Purchasing Manager   -   Initial Jobless Claims (Mar 28)   -   Change in Nonfarm Payrolls
-   PCE Core (YoY)(Feb)         UK                                   (Mar)                        -   ISM Manufacturing (Mar)               (Mar)
-Dallas Fed Manf. Activity (Mar) - GDP (YoY)(4Q F)               -   Factory Orders (Feb)         -ISM Prices Paid                      -   Unemployment Rate (Mar)
GERMANY                          FRANCE                                                           EURO ZONE
                                                                 -NAPM-Milwaukee (Mar)                                                  -   Change in Manufact. Payrolls
-   CPI (YoY)(Mar P)            -GDP (YoY)(4Q F)                 EURO ZONE                        -PMI Manufacturing (Mar F)             (Mar)
                                JAPAN
-                                                                -   Unemployment Rate (Feb)      UK                                    GERMANY
                                -   Jobless Rate (Feb)                                            - PMI Manufacturing (Mar)
                                                                 -CPI Estimate (YoY)(Mar)                                               -   Factory Order (YoY)(nsa)
                                -   Industrial Production YoY%   GERMANY                          GERMANY
                                                                                                                                         (Jan)
                                 (Feb P)                         -   Unemployment Rate (s.a)      -PMI Manufacturing (Mar F)            UK
                                HONG KONG                                                         FRANCE
                                                                  (Mar)                                                                 -   PPI Input NSA (YoY)(Feb)
                                -   Retail Sales-Volume                                           -PMI Manufacturing (Mar F)
                                                                 HONG KONG                                                              -   PPI Output n.s.a. (YoY)( Feb)
                                    (YoY)(Feb)                                                    JAPAN
                                                                 -   Govt Mthly Budget Surp/Def                                         -   PPI Output Core NSA
                                                                                                  -Vehicle Sales (YoY) (Mar)
                                                                     HK$ (Feb)                                                              (YoY)( Feb)
                                                                                                  CHINA
                                                                                                  - PMI Manufacturing (Mar)

Source: Bloomberg L.P.

Remarks:
MoM : Month on month                 QoQ : Quarter on quarter                YoY : Year on year

            Next Quarterly Investment Outlook will be available on 8 April 2010.

                            Please refer to page 13 of this commentary for disclaimer.




                                                                                                                 Page 12 , Total 13 Pages
Disclaimer
This document has been issued by Hang Seng Investment Services Limited (“HSIS”) and the information herein is based
on sources believed to be reliable and the opinions contained herein are for reference only. This document is not and
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document.


(HSIS 05/07)




                                                                                      Page 13 , Total 13 Pages

				
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